Can you get what you want in your price range

This is a question asked by everyone that starts to look for a house. So how do you find out what you get for a certain price?

First I'd take your established price range and with your realtor mark areas of town where homes are selling in that range. At this point be very broad, you don't need to pinpoint by exact street. There's no reason to be closing options this early in the game.

Once you have the areas, do you see any that are not desireable because of location? Too far from work, family, downtown, etc. Any other areas that are a definate No for any other reason?Go ahead and mark these off the list. If you're familar with all the areas on the list you can skip the next step.

If you're not familar with the areas it's time to take a drive through them to get to know them better. This can be in an afternoon or over the course of a week or two depending on your schedule.

Have you realtor pull some listings in each of the chosen area(s). It may only be one area and that's fine. Get a good sampling of homes for sale so you can get a good feel for the houses there. Take some at the low end, the high end and the middle of the market. Are they big? Small? New? How many bedrooms? Garage?

Now that you've got a basic feel for the homes it's time to figure out what you're looking for. This differs from person to person, but also in area to area. For instance, if you're looking in a newer community the age of the home is very important. However if you're looking in an older neighborhood it doesn't matter very much if the house was built in 1944 or 1950.

After deciding on what is important, compare that to the areas. Do they match up? If so, you're on your way towards searching for a house! If not, reassess your needs and/or the areas until you've got a match.

For some this process is very quick. For others it can take a while. But for everyone it's a good way to 1) get to know the market and 2) realistically assess what you're looking for in a house.

I'm a real estate broker in Austin and would be happy to sit down with you to discuss buying a home or planning to buy a home. Bill Conover, Broker 844-1910

How much house can you afford

When starting to search for a new house one of the most important items to know is how much you'd like to spend. Sure you'd like to spend one dollar, so let me rephrase that. How much would you realistically like to spend? Fannie Mae underwriting guidelines use a "Debt to Income" ratio (DTI) when approving a loan. Currently they cap the DTI at 41%. DTI is based on monthly debt to monthly income. So to figure how much you can spend on a house payment multiply your monthly income by 41% and subtract your non-housing monthly payments (car loan, credit cards, student loans) from that amount. The result is what you could spend on housing and be approved for a mortgage.

I've emphasized 'could' as that doesn't mean you should spend that much, but that's the maximum the guidelines would allow. Now that you know what you have to spend on a house you'll need to decide what payment amount you'd be comfortable with. The last thing you want to do is to get into a situation where all your income is going out each month and you don't have extra for savings, retirement, travel, etc.

After you decide on a good number you can use the following to figure out a home price. A mortgage payment (including taxes and insurance) is roughly just less than 1% of the sales price. So if you'de like a payment of $1800 that would be for a roughly $200,000 house. These are rough numbers as interest rate, taxes and down payment are all TBD. For an accurate quote please email me, I'm happy to run some numbers for you.

The next thing to think about is since you've found a price range, can you get what you want in that price range? I'll be covering this next month so be sure to stop by my blog in early May.

When to refi

Typically homeowners will refinance their current mortgage for one of two reasons: to get a lower rate and payment or to cash out on some equity. Since rates are so low now I'll only discuss the first. The first step when thinking about a refi is to see what your loan characteristics are currently. This is the rate, the term length, whether there is mortgage insurance, loan amount, any seceondary financing and whether there are escrow accounts or not. Now that you have this info it's time to contact a lender and get a loan quote.

The lender will need the above info as well as your plans for staying in the house. Do you plan on being there 5 years, 10 years, forever? Or maybe you plan to move in 3 years but will rent it out at that point. This gives a time frame for comparing refinancing vs not refinancing.

The lender can then give an estimate of where the rates and terms are for available financing given your scenario. There are closing costs involved in refinancing so it's good to find the 'break even point'. This is when the interest you save each month is cumulatively enough to reach the amount of closing costs you pay.

For example: Let's say closing costs are $5,000 and the interest savings per month is $200. You'd need to keep the loan for $5,000/$200 = 25 months for the refinance to be worth it.

As you'll be estimating how long you'll be in the house and can't name a specific month, I like to give a cushion of 6 months to a year when deciding whether it's worth it. In the above example, if you said you'd be in the house 2 1/2 years, I'd advise that it's probably not worth it as you may very well move before the break even point. Alternatively if you planned on staying 3 years, I'd say it'd be worth refinancing then.

There are a few more steps and info needed to get a proper rate quote from the lender, but once that's accomplished we'd go through the above process. If you think your rate may be a little high, give me a call. I'd be happy to discuss.
-Bill 512-844-1910
billconover@america-lending.com

$8000 homebuyer credit

Legislation was pass as part of the stimulus package for a new tax credit for homebuyers. The new credit is $8,000 and is a true credit that does not need to be repaid. This is much different than the previous $7,500 credit, which had to be paid back to the IRS.

As it stands now, it’s free money. This will be a great deal to take advantage of. If you’re thinking about buying, give me a call and we can discuss options.

There are a few stipulations to the credit and I’ve outlined the main ones below:

• Buyer must be a first time homebuyer
  
• Credit is the lesser of $8,000 or 10% of sales price
  
• If buyer keeps house 3 years, credit does not need to be repaid. If owner sells before 3 years is up, the full amount needs to be repaid
  
• Must purchase before December, 1 2009
  
• Income must be lower than $75,000 for filing single and $150,000 for filing jointly
  
• Credit is taken when you file your tax return